[00:00:00] Speaker 00:
Case number 25-5054, Servier Pharmaceuticals LLC, a balance, versus Robert F. Kennedy Jr.

[00:00:08] Speaker 00:
in his official capacity as Secretary of Health and Human Services, amendment AUS in his official capacity as Administrator for the Centers for Medicare and Medicaid Services.

[00:00:17] Speaker 00:
Mr. Perdue, for the balance.

[00:00:19] Speaker 00:
Mr. Janda, for the ABL East.

[00:00:21] Speaker 00:
Good morning, Council.

[00:00:22] Speaker 06:
Good morning, Your Honors, and may it please the Court.

[00:00:24] Speaker 06:
William Perdue on behalf of Servier Pharmaceuticals LLC.

[00:00:27] Speaker 06:
I'd like to reserve three minutes for rebuttal.

[00:00:30] Speaker 06:
Because the government has abandoned one of the two grounds for the decision below, this appeal comes down to a single question.

[00:00:37] Speaker 06:
Whether the 2021 expenditures for TIPSOVO count or it's quote, the total expenditures under part D for any one of the specified small manufacturer drugs of Servier.

[00:00:49] Speaker 06:
The answer to that question is yes, for three independent reasons.

[00:00:53] Speaker 06:
First, Servier undisputedly manufactured TIPSOVO in 2021, and the statutory analysis is product by product, not unit by unit.

[00:01:03] Speaker 06:
Second, even if the analysis were unit by unit, Servier, as the NDA holder, was legally responsible for every unit of TIPSOVO that was sold after April 1, 2021.

[00:01:16] Speaker 06:
And third, even if the NDA alone were not enough, CMS never explained its exclusive reliance on labeler codes.

[00:01:24] Speaker 06:
And on remand to the agency, Cervier can present evidence of packaging and quality control activities that would satisfy even the most stringent reading of the statute.

[00:01:35] Speaker 06:
I'd like to start with our argument that the analysis is product by product rather than unit by unit.

[00:01:40] Speaker 03:
I'm just asking one thing in a post-flip of right where we're on

[00:01:45] Speaker 03:
Why does it matter that the government is no longer arguing for one interpretation of the statute?

[00:01:53] Speaker 03:
I assume you're referring to the- That the district court actually ruled on, so we have that now decision before us.

[00:01:58] Speaker 06:
Yes.

[00:01:58] Speaker 06:
So I assume you're asking about the coverage gap discount program agreement requirement.

[00:02:05] Speaker 06:
Yes.

[00:02:05] Speaker 06:
So under Loper-Brite, it is this court's job to resolve the meaning of statutory provisions whose meaning is disputed by the parties before the court.

[00:02:14] Speaker 06:
It is not this court's job to tell parties what arguments to make to the court.

[00:02:20] Speaker 06:
And therefore, here, this court simply does not have a dispute before it about whether that particular provision of the statute.

[00:02:29] Speaker 04:
It's a different rule under which we can affirm a judgment on any ground supported by the record.

[00:02:37] Speaker 04:
And it's a legal question.

[00:02:40] Speaker 04:
We are post Chevron, so there's no question about, you know, if you're in the gray area, the agency can go either way.

[00:02:48] Speaker 04:
It's just pure legal question presented that's potentially dispositive and, you know, to my judgment, looks a little bit more straightforward and cleaner than the one you all want us to address.

[00:03:02] Speaker 06:
So I think the important point is that this is CMS's statute to enforce, and they have not put for this court any argument that we have.

[00:03:11] Speaker 06:
District court has put it before us.

[00:03:14] Speaker 06:
Yes, but I think there's no argument by the parties in front of this court that that requirement hasn't been met.

[00:03:21] Speaker 06:
And I think for that reason, the

[00:03:24] Speaker 06:
the requirement here is not just forfeited, is it affirmatively waived?

[00:03:28] Speaker 06:
And in addition, for that reason, actually affirming on that ground would violate the party presentation principle.

[00:03:34] Speaker 03:
I think the Supreme Court summarily... We wouldn't... That that would invalidate our rule that Judge Katz has just referenced, that we can affirm on any basis

[00:03:46] Speaker 03:
preserved in the record.

[00:03:48] Speaker 03:
It wouldn't be the first time that we would do such a thing.

[00:03:53] Speaker 03:
I'm not saying we will in this case, but it wouldn't be the first time we've done that when the parties were focused elsewhere.

[00:03:59] Speaker 06:
I think when this court does that, it is traditionally when an argument has been made below and made before this court, but the court below hasn't actually reached that issue.

[00:04:13] Speaker 06:
I can point this court to the Supreme Court's recent summary reversal just last month in Clark v. Sweeney.

[00:04:19] Speaker 06:
The Supreme Court summarily reversed the Fourth Circuit for violating the party presentation principle for

[00:04:28] Speaker 06:
I'm reversing it, granting habeas relief in a case based on arguments that they were reversing.

[00:04:35] Speaker 06:
The Supreme Court reversed.

[00:04:37] Speaker 06:
That's correct.

[00:04:38] Speaker 03:
And do the Fourth Circuit reverse the trial court?

[00:04:40] Speaker 06:
I would have to check your honor.

[00:04:43] Speaker 03:
I thought you said that they had reversed something.

[00:04:45] Speaker 06:
The Supreme Court summarily reversed the Fourth Circuit.

[00:04:48] Speaker 03:
I mean, but it matters because this is a rule that allows us to affirm not alternative grounds to affirm or a lot.

[00:04:55] Speaker 04:
easier for us to reach than alternative grounds to reverse where you are running squarely into the party presentation.

[00:05:02] Speaker 03:
And the fourth second had to reverse the crowd in that case.

[00:05:07] Speaker 06:
So I think the other, so I think there's, we have affirmative waiver here, not just forfeiture, affirmative waiver.

[00:05:16] Speaker 04:
The other thing- I get all that.

[00:05:18] Speaker 04:
There are some prudential considerations cutting in favor of our not resting on that ground.

[00:05:29] Speaker 04:
I think there's but there may be others.

[00:05:31] Speaker 04:
I mean, maybe others to cut the other way.

[00:05:36] Speaker 06:
Well, if I could, I think this is very straightforward.

[00:05:38] Speaker 06:
Here's I think here's here's another reason.

[00:05:41] Speaker 06:
If you were sort of getting towards the merits of this argument, one of our arguments for why it was incorrect for the for the for the district court to determine that this requirement in the statute had not been met is that that was not the basis of CMS's decision, and therefore it violated January.

[00:05:58] Speaker 04:
I think by doesn't violate January for a court to

[00:06:04] Speaker 04:
enforce a legally mandatory requirement.

[00:06:08] Speaker 04:
Generary is all about discretionary decisions, and maybe pre-Loper-Brite close interpretive questions had an aspect of that, but not anymore.

[00:06:21] Speaker 04:
This is either covered by the CGDP agreement of such manufacturer in such year.

[00:06:28] Speaker 04:
If it means what it seems to say,

[00:06:33] Speaker 06:
you lose, period, full stop.

[00:06:36] Speaker 06:
So I can give you yet another reason why I think this course should not affirm on that ground, which goes straight to the merits, skipping past generating, which I do think is a problem.

[00:06:44] Speaker 04:
Let's just finish up on preservation.

[00:06:45] Speaker 04:
I'm going to I'm interested in the merits, obviously, but just give me all you have on preservation and then I'm sorry on preservation on on credential considerations, why you think we should not reach

[00:06:57] Speaker 06:
So I think there are three.

[00:06:59] Speaker 06:
It's affirmative waiver.

[00:07:01] Speaker 06:
It's affirmative waiver, not forfeiture.

[00:07:02] Speaker 06:
It's the party presentation principle.

[00:07:04] Speaker 06:
And it's the fact that this was not the basis of CMS's denial.

[00:07:09] Speaker 06:
So it would violate Chenery.

[00:07:11] Speaker 06:
If you go to the merits of this CGDP agreement requirement, I think both parties are correct on the merits here.

[00:07:20] Speaker 06:
So if you go back to 2021,

[00:07:22] Speaker 06:
the CGDP statute required Cervier to include TIPSOVO on its coverage gap discount program agreement.

[00:07:32] Speaker 06:
But CMS at the time prohibited Cervier from doing that.

[00:07:38] Speaker 06:
In its guidance under the coverage at discount program agreement, um, survey told CMS told parties like survey to leave tip Sobo on the old manufacturers, coverage, get discount program agreement and just work things out between themselves.

[00:07:52] Speaker 06:
That's what, um, that's what CMS told us to do.

[00:07:55] Speaker 06:
And so that's what we did do.

[00:07:57] Speaker 06:
Now, today, if CMS had allowed, had followed the district for its interpretation of the statute, CMS would be telling Cervier that actually Cervier was violating the CGTP statute back in 2021.

[00:08:13] Speaker 06:
And as a result, it's also violating this statute now.

[00:08:18] Speaker 06:
And that kind of inconsistency is quintessentially arbitrary.

[00:08:25] Speaker 06:
If there are no further questions on the coverage gap discount program.

[00:08:29] Speaker 04:
That sounds a little bit like an argument that the government's prior misinterpretation of a legal duty immunizes violations going forward.

[00:08:51] Speaker 06:
I wouldn't characterize it that way.

[00:08:53] Speaker 06:
I think an important aspect of the way that CMS implemented the CGDP program back in 2021 is that it was implemented through agreements.

[00:09:03] Speaker 06:
So the requirement was that Serbia had to include TIPSOVO on an agreement between TIPSOVO, between Serbia and HHS.

[00:09:13] Speaker 06:
see a survey can't do that unilaterally obviously it's an agreement they can only put things on the agreement that HHS will agree to and HHS had guidance that said we will not agree to that we want we want you to keep it on the other on the other agreement and work things out between yourselves and so that's what we did the agreements are filed roughly a year out

[00:09:37] Speaker 04:
Before the year, the 2021 agreement would have been filed before January 1, 2021.

[00:09:44] Speaker 06:
I don't recall whether the agreements are are annual or updated or they're just ongoing.

[00:09:50] Speaker 04:
I'm not sure what I was going to ask.

[00:09:52] Speaker 04:
Maybe you don't know.

[00:09:53] Speaker 04:
Are they once they're filed, is there some mechanism for.

[00:09:57] Speaker 04:
on your amendments.

[00:09:59] Speaker 06:
There is certainly a mechanism for adding new labor codes to an existing agreement.

[00:10:05] Speaker 06:
But you can only add full labor codes you could you can add the individual drug.

[00:10:13] Speaker 04:
the label or code identifying the manufacturer.

[00:10:15] Speaker 06:
Right, so we could have put all of Agios' products on Servier's CGDP agreement in 2021, but that's not what the transaction was between Servier and Agios.

[00:10:30] Speaker 06:
We only bought the one drug, and so we couldn't put only the one drug that we bought onto Servier's.

[00:10:37] Speaker 04:
You had bought the entire company

[00:10:41] Speaker 04:
You could have amended the agreement to reflect.

[00:10:46] Speaker 04:
all the new drugs of that company, and that would have solved this aspect of your problem.

[00:10:54] Speaker 06:
Yes, we could have put the whole labeler code on, but we could not put on the individual drug that we bought.

[00:10:59] Speaker 06:
That was impossible, and impossible requirement.

[00:11:02] Speaker 04:
And so, no, so I'm interrupting you, sorry, but the basic idea is kind of the greater power to amend mid-year as to

[00:11:14] Speaker 04:
all the products of an acquired company suggests a lesser power to do an amendment just for the one drug?

[00:11:24] Speaker 06:
It's not a greater includes the lesser sort of situation, because what you put the mechanism for the amendment is you put the labeler code on the agreement.

[00:11:34] Speaker 06:
And the labeler code includes all of the drugs for that labeler, for that manufacturer.

[00:11:40] Speaker 04:
The greater power to add a labeler code

[00:11:43] Speaker 04:
suggests a lesser power to add the drug code?

[00:11:46] Speaker 04:
Is this a friendly line?

[00:11:50] Speaker 06:
Yes.

[00:11:51] Speaker 06:
If you're asking whether CMS could have administered the program drug by drug so that we could have done this, yes, CMS, HHS absolutely could have done that.

[00:11:59] Speaker 06:
But they didn't.

[00:12:00] Speaker 06:
And there was nothing we could do about that unilaterally.

[00:12:03] Speaker 06:
We were at HHS and CMS' mercy at that time.

[00:12:07] Speaker 06:
If I now turn to the arguments that the parties have actually disputed before the court, I want to start with our argument that the analysis under the statute is product by product and not unit by unit.

[00:12:20] Speaker 03:
Can I ask a fact question for you?

[00:12:22] Speaker 03:
Yes, please.

[00:12:25] Speaker 03:
Where does it appear?

[00:12:27] Speaker 03:
Is it on the pill?

[00:12:28] Speaker 03:
Is it on the bottle?

[00:12:29] Speaker 03:
Is it on the pallet?

[00:12:31] Speaker 06:
It is not required to appear, but in general, it is the FDA's regulations recommend that it appear on the box.

[00:12:40] Speaker 03:
So, if I buy an individual box of Tylenol or something, it'll have a label or code on it?

[00:12:45] Speaker 06:
It's recommended by FDA that it appear there, and it most likely would.

[00:12:50] Speaker 03:
Okay.

[00:12:50] Speaker 03:
Otherwise, it is simply a reporting form.

[00:12:53] Speaker 03:
It's used for reporting

[00:12:55] Speaker 06:
It's a record keeping mechanism for FDA to keep track of different drugs.

[00:13:05] Speaker 03:
like sales of drugs, at least to Part D beneficiaries had to be reported to as well.

[00:13:09] Speaker 06:
Yes.

[00:13:10] Speaker 03:
So there's a label or code.

[00:13:12] Speaker 06:
Yes.

[00:13:12] Speaker 06:
So there's a mechanism called PDE data under Medicare Part D in which the insurance company after the fact submits a record to CMS of all the transactions that have happened.

[00:13:25] Speaker 06:
It includes a lot of different pieces of information.

[00:13:27] Speaker 06:
The drug was, what the price was.

[00:13:31] Speaker 06:
other information and among the pieces of information there is the labeler code.

[00:13:36] Speaker 03:
It's who manufactured the drug the Part D beneficiary received.

[00:13:39] Speaker 06:
It's not actually the manufacturer.

[00:13:41] Speaker 06:
It's just the labeler code.

[00:13:42] Speaker 03:
The labeler code identifies the manufacturer.

[00:13:44] Speaker 03:
You said that already.

[00:13:45] Speaker 03:
That's one of the things the labeler code does is identify the manufacturer.

[00:13:48] Speaker 06:
It can identify that.

[00:13:50] Speaker 06:
If I said that, I misspoke.

[00:13:51] Speaker 06:
The labeler code can identify the manufacturer, but that's not the only person it can indicate.

[00:13:58] Speaker 06:
It can indicate the repacker, the relabeler, and most relevant here, it can indicate the private label distributor.

[00:14:05] Speaker 03:
A sale could be made without knowing who manufactured the pill.

[00:14:10] Speaker 03:
Probably in case there's any sort of adulteration or contamination processes.

[00:14:15] Speaker 03:
It has to be identified in the manufacturer in this process.

[00:14:18] Speaker 06:
It's not that it's not known, it's just that that number that is on the box can refer to entities that performed a number of different roles in the manufacturing process.

[00:14:29] Speaker 06:
It can include the manufacturer, but it could be the relabeler, it could be the repacker, or it could be... What would identify the manufacturer?

[00:14:36] Speaker 06:
There's no...

[00:14:38] Speaker 03:
They've got to be tracing who manufactured a drug.

[00:14:41] Speaker 06:
It's not the labeler code that's necessary.

[00:14:43] Speaker 06:
What does it do it?

[00:14:45] Speaker 06:
Our position would be that the NDA indicates who is really the manufacturer.

[00:14:51] Speaker 03:
When the insurance company is providing information to Medicare or CMS about sales to Part D beneficiaries,

[00:15:00] Speaker 03:
It identifies the manufacturer as part of the label.

[00:15:02] Speaker 06:
It does not identify the manufacturer.

[00:15:04] Speaker 06:
It identifies the label or code.

[00:15:06] Speaker 06:
And the label or code may indicate the manufacturer, but it may not.

[00:15:09] Speaker 03:
OK, and then what if there's something wrong with the pills?

[00:15:11] Speaker 03:
How do they find who manufactured them?

[00:15:12] Speaker 03:
They know who's gotten it.

[00:15:13] Speaker 03:
Who got it?

[00:15:14] Speaker 06:
That's an FDA enforcement issue, and they have investigatory powers.

[00:15:21] Speaker 06:
They can look at who held the NDA, but the labeler code is not how they determine who is the manufacturer, because we quote and cite the FDA's

[00:15:32] Speaker 06:
um ndc or national drug code um regulations in our briefs and it is clear as day and express in those regulations that the label or code can indicate um entities that are not the manufacturer where is that which regulation is that um i don't have the site in front of my fingertips i'll i'll give it to you on rebuttal if that's all right

[00:15:51] Speaker 01:
But the other thing is that 21 CFR Section 207.33C requires that if you're engaging in manufacturing, you're to update that label code within 30 days.

[00:16:02] Speaker 01:
So why wouldn't that be a necessary requirement that you couldn't wait 6 months to do that?

[00:16:08] Speaker 05:
Sorry, I'm not following the question.

[00:16:10] Speaker 01:
You're required to update the label or code information within the 30 days.

[00:16:15] Speaker 01:
You didn't do so here.

[00:16:16] Speaker 01:
And then now you're seeking credit basically for that label or code, you know, with respect to the sales.

[00:16:22] Speaker 06:
So I'm not sure what the regulatory site you provided is referring to and what kind of update you're referring to.

[00:16:30] Speaker 06:
I can try to look at that on rebuttal.

[00:16:34] Speaker 06:
But the critical point, I think, for the court to understand is the labeler code does not necessarily indicate the manufacturer.

[00:16:42] Speaker 06:
It simply doesn't.

[00:16:43] Speaker 06:
And I think that's the district court cited and quoted.

[00:16:46] Speaker 03:
What does it indicate?

[00:16:47] Speaker 03:
What's the point of the labeler code?

[00:16:49] Speaker 06:
It indicates an entity that engaged in one of several possible activities with respect to that drug.

[00:16:56] Speaker 06:
It can indicate that it was the manufacturer.

[00:16:58] Speaker 06:
It can also indicate that it's the relabeler or the repacker or the private label distributor.

[00:17:03] Speaker 06:
And actually, in this case, the two labels we're talking about here, the AGIOS's label from 2021 and Cervier's label from 2022,

[00:17:12] Speaker 06:
Those labels indicate that Agios and Serviet, respectively, were the private label distributor of this drug.

[00:17:20] Speaker 06:
And I think it's important for the court to remember that the manufacturing definition in the statute harves out distributors.

[00:17:28] Speaker 06:
So an entity that is a mere distributor is not a manufacturer under the statute.

[00:17:34] Speaker 06:
If I can go back to our main statutory argument, which I think sidesteps a lot of these issues, that is our argument that the analysis is product by product, not unit by unit.

[00:17:47] Speaker 06:
The key statutory language.

[00:17:48] Speaker 04:
Which is an odd framing.

[00:17:51] Speaker 04:
I mean, you have some nuggets and

[00:17:57] Speaker 04:
There are aspects of this statute that one can read to support that, but it just seems like a very odd framing in the context where this is all about items that are paid for by Medicare or CMS.

[00:18:14] Speaker 04:
They pay for individual increments of this drug.

[00:18:19] Speaker 04:
They don't pay for the product.

[00:18:21] Speaker 06:
Yes, everyone agrees here that to calculate the relevant total expenditures here, you need to aggregate expenditures for multiple TIPSOVO units.

[00:18:31] Speaker 06:
The question before the court is, do you aggregate some TIPSOVO units, the ones with the right labeler code on them, or do you aggregate all of them?

[00:18:40] Speaker 06:
And our interpretation of the statute is simple.

[00:18:43] Speaker 04:
Total expenditures under... Suppose for the sake of argument, just to...

[00:18:47] Speaker 04:
untangle the statutory argument from the arbitrary and capricious argument.

[00:18:51] Speaker 04:
Just suppose for purposes of the question, we think the label or code just means the manufacturer.

[00:19:01] Speaker 04:
I know you dispute that.

[00:19:04] Speaker 06:
Yes, and I don't think that the government actually disputes that either.

[00:19:10] Speaker 06:
The government's view is that the labeler code is a proxy for the quote actual manufacturer.

[00:19:16] Speaker 04:
Okay, fair enough.

[00:19:17] Speaker 04:
Suppose it's a reasonable proxy.

[00:19:19] Speaker 04:
Or forget about the code and let's just talk about the substantive law.

[00:19:24] Speaker 06:
OK, I believe there are two questions there, so I'll try to answer them in turn.

[00:19:29] Speaker 06:
So even if you think that the labeler code is a reasonable proxy for the actual manufacturer, it is not the only possible proxy.

[00:19:37] Speaker 06:
Another one, for example, would be who holds the NDA.

[00:19:41] Speaker 06:
That is, in fact, how CMS itself today.

[00:19:45] Speaker 04:
Lying back into the arbitrary and capricious argument.

[00:19:48] Speaker 04:
Yes, I thought that's where you were heading.

[00:19:49] Speaker 04:
I want to stay on the contrary to law point for now.

[00:19:53] Speaker 06:
So our point is simply that the

[00:20:00] Speaker 06:
Our interpretation of the statute is simply that the total expenditures under Part B for one of the specified small manufacturer drugs of the manufacturer.

[00:20:09] Speaker 06:
And I think everyone agrees that that refers to a product, not a unit.

[00:20:13] Speaker 06:
So the total expenditures for that product means all of the expenditures for that product.

[00:20:19] Speaker 06:
Now, Judge Katz, you suggested that that might have some counterintuitive results.

[00:20:25] Speaker 06:
I would welcome the opportunity to explain to you why we think that actually makes sense in light of the statutory purpose.

[00:20:30] Speaker 04:
Okay, so the counterintuitive ones are the December 31st.

[00:20:37] Speaker 04:
Acquisition where 99% of the stuff is.

[00:20:42] Speaker 04:
Manufactured and sold by the predecessor company.

[00:20:48] Speaker 04:
Absolutely.

[00:20:48] Speaker 06:
And you want attribution of all of that.

[00:20:50] Speaker 06:
Yes.

[00:20:51] Speaker 06:
So I think the important thing to remember is that the purpose of this statute, the purpose of the specified small manufacturer definition is to identify a particular kind of manufacturer.

[00:21:01] Speaker 06:
a small manufacturer with a non-diversified Part D product portfolio.

[00:21:06] Speaker 06:
When you're evaluating the diversity of a company's product portfolio, it is quite reasonable to do that analysis product by product.

[00:21:15] Speaker 06:
Now, we can talk about the edge cases, but just a product by product approach is certainly a reasonable way for Congress to approach this question overall.

[00:21:25] Speaker 06:
And it goes specifically to this hypo.

[00:21:27] Speaker 06:
Yes, under a product by product approach, under your hypo, all expenditures for the whole year for that product count towards the 80% threshold.

[00:21:37] Speaker 06:
That result may be counterintuitive, but it doesn't undermine our product by product reading for a couple of reasons.

[00:21:42] Speaker 06:
First, I think at least part of the idea behind that hypothetical is that it seems to allow a manufacturer to gain the system in some way.

[00:21:51] Speaker 06:
But it's important to remember that this is a 2022 statute that is keyed to events that occurred beforehand in 2021.

[00:21:59] Speaker 06:
So there is absolutely no possibility of gamesmanship here.

[00:22:02] Speaker 06:
Congress, by the way it designed the statute, it eliminated that possibility.

[00:22:06] Speaker 06:
And in fact, for that reason, we know sitting here today that that hypo that you posited won't ever actually happen.

[00:22:15] Speaker 06:
The government already knows the entire universe of cases to which this statute will ever apply, and it has already made virtually all of the determinations that this statute will ever require.

[00:22:28] Speaker 06:
I do think even if this scenario would happen, it still makes sense.

[00:22:35] Speaker 04:
Fair point about gamesmanship, but you still have a statutory structure that seems to

[00:22:44] Speaker 04:
Um, use events in the past as a proxy for, you know.

[00:22:53] Speaker 04:
prospective assessment of are you small enough and are you non-diversified enough?

[00:22:58] Speaker 06:
I couldn't agree more.

[00:22:59] Speaker 06:
And I think that's why a product by product approach actually does make sense, even in the hypothetical you gave the December 31st acquisition.

[00:23:07] Speaker 06:
So fungus was trying to determine in 2022, whether identify manufacturers that are small and non-diversified.

[00:23:14] Speaker 06:
It does that by looking back to 2021.

[00:23:17] Speaker 06:
There's nothing magic about 2021.

[00:23:18] Speaker 06:
It's just the last full calendar year on record.

[00:23:22] Speaker 06:
So if during 2021 you have a company that has one product that warfs the sales of all of its other products, odds are that that product is going to dominate their sales going forward into 2022 as well, even if they only made one unit.

[00:23:43] Speaker 06:
And I think actually if you've only focused on that one unit, you would really get a misleading picture of the diversity of that company's product portfolio.

[00:23:52] Speaker 06:
And I think that's actually exactly what happened here.

[00:23:57] Speaker 06:
Cervier acquired this product in April.

[00:24:01] Speaker 06:
It began manufacturing the product.

[00:24:02] Speaker 06:
It was earning revenue from this product because of a quirk of how FDA allows a manufacturer like Cervier to use the old manufacturer's labeler code during a transition period.

[00:24:17] Speaker 06:
The labeler code wasn't used during 2021.

[00:24:22] Speaker 06:
Going into the sales from that product during 2021 warped everything else they were doing and going forward into 2022 and forward when these discounts are actually going to kick in, TIPSOVO again was still dominating the entire portfolio.

[00:24:40] Speaker 06:
Another way to put it, Josh Katsas, would be that the

[00:24:44] Speaker 06:
The government is suggesting with that hypothetical that our rule is is over inclusive.

[00:24:53] Speaker 06:
Their rule is under inclusive because it doesn't account for this kind of situation where.

[00:24:59] Speaker 06:
We're exactly who this this statute was denied for, which was small.

[00:25:04] Speaker 06:
That's undisputed.

[00:25:06] Speaker 06:
That's the specified manufacturer part of the statute.

[00:25:09] Speaker 06:
And we clearly had a non diversified product portfolio going into 2022.

[00:25:13] Speaker 03:
It's exactly who Congress wanted not manufacture.

[00:25:18] Speaker 03:
as in, if you think of manufacturers, is what was sold, it was made and sold that year to Part D beneficiaries, which is also what the statutory language closely focuses on.

[00:25:30] Speaker 03:
What did you make that you sold to Part D beneficiaries?

[00:25:35] Speaker 03:
And my understanding from the record is that was made and sold to Part D beneficiaries in 2021 was, I don't know how to say agvose, agiosis.

[00:25:47] Speaker 03:
Pre-existing stock, 100% pre-existing stock, which was not in any sense manufactured by, it was manufactured, all done being manufactured before the agreement was inked.

[00:26:04] Speaker 03:
And it was then sold to Part D beneficiaries.

[00:26:08] Speaker 03:
And what's wrong about that?

[00:26:09] Speaker 06:
So if the analysis is product by product, the only question for this court is, did Serbia manufacture the product?

[00:26:16] Speaker 06:
And we undisputedly did.

[00:26:16] Speaker 03:
Well, then you want to say just because we all, two entities here, I'm assuming IDEOs as well, were small and non-diversified.

[00:26:25] Speaker 03:
One of them actually manufactured 100% of the pills that were sold to Part D beneficiaries in 2021.

[00:26:34] Speaker 03:
And one comment came in later to own the rights to those pills, but did not manufacture them.

[00:26:43] Speaker 03:
It just said, well, I've got this pile of pills over here.

[00:26:48] Speaker 03:
Let's let it out in the market, so I'll make some money off of it.

[00:26:52] Speaker 06:
So if the analysis is product by product, that doesn't matter.

[00:26:55] Speaker 06:
But I take it you're positing that you interpret why Congress would what do you mean?

[00:27:00] Speaker 03:
I mean, I mean, product by product lip product had to be by the statutory terms had to be what was sold.

[00:27:09] Speaker 03:
What was manufactured and sold.

[00:27:14] Speaker 03:
to Part D beneficiaries in 2021.

[00:27:16] Speaker 03:
Those are other statutory requirements.

[00:27:18] Speaker 03:
That's what Congress was focused on textually.

[00:27:22] Speaker 03:
And if it's pre-existing stock, you didn't manufacture something that's already made.

[00:27:28] Speaker 06:
So I think that you're pointing to the of the manufacturer language in the statute, if I understand your question.

[00:27:33] Speaker 06:
And I think that the important textual point on that is that the of the manufacturer comes after the words one of the specified small manufacturer drugs.

[00:27:43] Speaker 06:
I think everyone agrees that that phrase refers to a product as a whole.

[00:27:47] Speaker 06:
And just adding the prepositional phrase of the manufacturer after it does not mean that one of the specified small manufacturer drugs is some subset of a product.

[00:27:58] Speaker 06:
It's still a whole product.

[00:27:59] Speaker 06:
It's just a particular kind of product, one that was made by the manufacturer during the year.

[00:28:07] Speaker 06:
And Serviette undisputedly did make Tibsovo during 2021.

[00:28:13] Speaker 03:
I think the broader question you're getting at, I think goes to... You didn't make it, physically make it, and sell it to Part D beneficiaries in 2021.

[00:28:27] Speaker 03:
That's the record before us.

[00:28:29] Speaker 06:
Yes, we made units and those units were not sold until 2022.

[00:28:35] Speaker 03:
Right, until about this year, particular year.

[00:28:38] Speaker 06:
And I think the point, Your Honor, is simply that that timing quirk doesn't matter if the analysis is product by product.

[00:28:45] Speaker 06:
But I see that you may not agree with me on that.

[00:28:48] Speaker 06:
So let me explain why we can still win even if you do disagree with me on that.

[00:28:52] Speaker 06:
So I have two answers for you about what we actually did in 2021.

[00:28:57] Speaker 06:
One is the actual story of what we did, which is what we would show to the agency on remand if given an opportunity.

[00:29:05] Speaker 06:
And the other is what we did

[00:29:07] Speaker 06:
Well, we already showed the agency based on holding the NDA.

[00:29:11] Speaker 06:
So, if you're looking at what we actually did and what we'll show on remand if we have an opportunity, we can give CMS a lot number for a tip SOVO that was actually dispensed to Part D patients in December of 2021.

[00:29:26] Speaker 06:
And then if you trace the manufacturing process for that lot backwards in time, on April 1, 2021, those tablets had been physically pressed, but they weren't labeled and packaged and ready for sale.

[00:29:39] Speaker 06:
So what happened was that after April 1, Cervier's contractor

[00:29:45] Speaker 06:
put those tablets in bottles, labeled and packaged the bottles in boxes, and put serial numbers on the boxes.

[00:29:52] Speaker 06:
And then later in the year, in 2021, units from that lot were dispensed to Part D patients.

[00:30:02] Speaker 06:
So we can draw every single link in that chain.

[00:30:06] Speaker 06:
So that is what actually happened and what we can show on remand.

[00:30:09] Speaker 03:
The manufacturer's defined.

[00:30:11] Speaker 03:
Right and you have to manufacture and you have to you have to be a manufacturer and that means that you were engaged in the production.

[00:30:20] Speaker 03:
You weren't preparation you weren't the propagation you weren't the compounding you weren't the conversion you weren't and the processing you weren't.

[00:30:30] Speaker 06:
I think we were involved in the, I left out in the story that I just told, there's one piece I left out, which is that Cervier personnel reviewed the quality control documentation from the contractor and affirmatively signed.

[00:30:45] Speaker 03:
That was not before the district court.

[00:30:47] Speaker 06:
Correct.

[00:30:47] Speaker 06:
That's not before the district court.

[00:30:48] Speaker 03:
That's not before us either.

[00:30:50] Speaker 06:
Correct.

[00:30:52] Speaker 06:
I'm trying to answer your question as to what we can show on remand.

[00:30:55] Speaker 06:
So if there's a remand, this is what we can show.

[00:30:57] Speaker 03:
Okay.

[00:30:57] Speaker 03:
I'm just trying to...

[00:30:59] Speaker 03:
Whatever you can show on remand is not really of much interest to us because you have to show to get a remand that you are a manufacturer and you made no record.

[00:31:09] Speaker 03:
Even assuming big quality control pumps, which isn't on this list.

[00:31:15] Speaker 03:
So you did not show in this record that you met the statutory definition of manufacturing.

[00:31:22] Speaker 03:
You showed that you owned the pills.

[00:31:24] Speaker 03:
And a lot of your briefing is clear.

[00:31:26] Speaker 03:
You owned the NDA.

[00:31:27] Speaker 03:
You owned the pills.

[00:31:29] Speaker 03:
You owned the rights for those pills.

[00:31:32] Speaker 03:
I get all of that, but owning is not the same as manufacturing.

[00:31:36] Speaker 03:
And this is a very specialized definition here that really is focused on, I mean, it goes on with use of chemical synthesis or extraction and chemical synthesis.

[00:31:47] Speaker 03:
I mean, it's really talking about the process of making these pills.

[00:31:51] Speaker 03:
And am I right that every single pill that was sold in 2021 to a Part D beneficiary

[00:32:01] Speaker 03:
was stock that pre-existed the inking of your agreement.

[00:32:06] Speaker 06:
The pills were physically pressed.

[00:32:10] Speaker 06:
Yes.

[00:32:10] Speaker 03:
If you're asking about what the pill... Nothing was manufactured after you took over the rights to this drug in 2021 that went to a Part D beneficiary that year.

[00:32:22] Speaker 06:
Depends on what you mean by manufacturing.

[00:32:24] Speaker 03:
I mean the statutory definition.

[00:32:25] Speaker 03:
No, the statutory...

[00:32:28] Speaker 03:
It's got to be making it in some way.

[00:32:31] Speaker 03:
And if everything that was sold was already made, then you didn't make it.

[00:32:38] Speaker 06:
So let me explain why I think that's not correct.

[00:32:41] Speaker 06:
So yes, the tablets were physically pressed before April 1.

[00:32:44] Speaker 06:
So that factual premise of your question is correct.

[00:32:47] Speaker 06:
We don't dispute that.

[00:32:48] Speaker 06:
As the NDA holder, we were legally responsible.

[00:32:52] Speaker 06:
And I think there's a very important point here, which is that

[00:32:55] Speaker 06:
The government's only response to the argument that the NDA is insufficient is that we didn't preserve it.

[00:33:00] Speaker 06:
So this court does not need to get into these merits questions at all.

[00:33:05] Speaker 06:
So if we preserve that argument, there's no further dispute about the merits here.

[00:33:09] Speaker 06:
But you've asked about the merits, so I want to answer your question.

[00:33:11] Speaker 03:
I don't think they agree that just holding the NDA makes you the manufacturer.

[00:33:14] Speaker 06:
They don't affirmatively agree, but they do not articulate any argument in their brief about why that's wrong.

[00:33:23] Speaker 03:
In their view, it wasn't raised below.

[00:33:26] Speaker 03:
That doesn't mean anything.

[00:33:28] Speaker 03:
But there's nothing in the statutory language that cares about who owns who has legal obligations with respect to.

[00:33:36] Speaker 03:
It's not the statutory language used here.

[00:33:38] Speaker 03:
They're focused on the manufacturer

[00:33:42] Speaker 06:
And so the reason, again, this gets to the merits, so this is only if you reach the merits, and even though the government hasn't argued it, but reaching the merits of this NDA argument, the point is the following.

[00:33:55] Speaker 06:
Servier as the NDA holder was legally responsible for the labeling, the quality control, and the manufacturing of every unit that was sold after April 1.

[00:34:03] Speaker 06:
So for example, if FDA had determined that the label on units sold after April 1 was missing a warning, for example.

[00:34:11] Speaker 03:
I get all of that.

[00:34:12] Speaker 03:
You owned all legal consequences.

[00:34:15] Speaker 03:
That's not what they're talking about.

[00:34:16] Speaker 03:
What is your best language to say that the definition of manufacturer includes

[00:34:25] Speaker 03:
someone who took pre-existent stock, did not make a pill, but had legal responsibility for it.

[00:34:33] Speaker 03:
Which word do you put legal responsibility into?

[00:34:36] Speaker 06:
I think we have legal responsibility for all of those words.

[00:34:41] Speaker 03:
Well, there was no more production.

[00:34:43] Speaker 06:
There was no more preparation.

[00:34:44] Speaker 03:
There was no more propagation.

[00:34:46] Speaker 03:
There was no more compounding.

[00:34:47] Speaker 03:
There was no more conversion.

[00:34:48] Speaker 03:
And there was no more processing as to those that pre-existing stock.

[00:34:53] Speaker 06:
So what I think Your Honor is suggesting is some kind of actual mission distinction.

[00:34:58] Speaker 06:
And there are many areas of the law where... I don't think I'm saying that at all.

[00:35:01] Speaker 03:
But I'm talking... Tell me which word.

[00:35:04] Speaker 06:
So the words in the statute include either directly or indirectly, which I think includes adopting actions taken by others.

[00:35:14] Speaker 06:
And I think it's important to remember.

[00:35:16] Speaker 06:
This is a situation where it makes sense to hold.

[00:35:19] Speaker 03:
Which action?

[00:35:20] Speaker 03:
I'll take your indirectly.

[00:35:22] Speaker 03:
Which one did you?

[00:35:24] Speaker 03:
Because you had all pre-existing stock.

[00:35:27] Speaker 03:
Did you produce it?

[00:35:30] Speaker 03:
Yes.

[00:35:31] Speaker 03:
If it already was produced, how did you produce it?

[00:35:33] Speaker 06:
Because we were responsible for it and here's how.

[00:35:37] Speaker 03:
I understand the NDA comes with legal obligations to you, right?

[00:35:42] Speaker 03:
If something had been

[00:35:45] Speaker 03:
gone, you know, got contaminated in your storage process, you're going to be held responsible for that.

[00:35:49] Speaker 03:
Or in your trucking process, you're going to be held responsible for that.

[00:35:52] Speaker 03:
That means you're distributing and you're legally responsible for distribution and maintaining quality control during distribution.

[00:35:59] Speaker 03:
That does not make you the manufacturer.

[00:36:01] Speaker 06:
So CMS itself disagrees with you on that point, Your Honor.

[00:36:06] Speaker 06:
This is not a novel argument.

[00:36:07] Speaker 06:
So in two other drug pricing programs, CMS itself today implements a materially identical manufacturer definition to say that it includes the NDA holder.

[00:36:19] Speaker 06:
That's the Medicaid drug rebate program and the drug price negotiation program.

[00:36:23] Speaker 03:
I understand there's other statutes, but that just shows that the language they've used here is very, very particularized.

[00:36:29] Speaker 06:
It's materially identical language.

[00:36:32] Speaker 06:
Absolutely identical.

[00:36:35] Speaker 06:
You can look at the statutes.

[00:36:36] Speaker 06:
There's no difference between them.

[00:36:39] Speaker 06:
And in the drug price negotiation program, when they were putting out their guidance on that program, a commenter made exactly this point to CMS.

[00:36:52] Speaker 06:
They said, you should use the labeler code, not the NDA holder.

[00:36:56] Speaker 06:
And CMS said, no, that's wrong.

[00:36:59] Speaker 06:
We disagree.

[00:37:00] Speaker 06:
We are going to treat the NDA holder as the manufacturer because that fits with, quote, the FDA regulatory framework.

[00:37:09] Speaker 06:
So that's an absolutely identical statute that is a distinct statute, yes.

[00:37:15] Speaker 06:
But the manufacturer definition is identical.

[00:37:20] Speaker 03:
Some of the other ones include things like labeling, packaging, distributing.

[00:37:25] Speaker 06:
Not the drug price negotiation program.

[00:37:28] Speaker 06:
The manufacturing definition is exactly the same, Your Honor.

[00:37:31] Speaker 06:
If I could pull back from the merits for a moment.

[00:37:33] Speaker 03:
And the use of that word manufacturer and the other statutory provisions, the operative provisions.

[00:37:40] Speaker 06:
It uses the word manufacturer and the definition of the word manufacturer, which has those six activities, it's exactly the same in the drug price negotiation program as it is in this statute here.

[00:37:52] Speaker 06:
And CMS today says that that means NDA holder in that program.

[00:37:58] Speaker 01:
So you don't think that updating the label or code has any effect on your arguments when that was a requirement as well?

[00:38:06] Speaker 06:
I'm not fully following your question, Your Honor.

[00:38:09] Speaker 06:
I apologize.

[00:38:09] Speaker 01:
Well, it says that you're supposed to update your labeling code once this agreement changed hands.

[00:38:16] Speaker 06:
I see what you're saying.

[00:38:17] Speaker 06:
Yes.

[00:38:17] Speaker 06:
So the reason we did not label this inventory that we were selling in 2021 with our labeler code is for a couple of reasons.

[00:38:26] Speaker 06:
First, this is common industry practice.

[00:38:29] Speaker 06:
In addition, it would have been wasteful to get rid of that stock.

[00:38:33] Speaker 06:
In addition, it would have created

[00:38:36] Speaker 06:
a break in the supply chain, a break in the supply of this life-saving medicine to patients to have to relabel everything.

[00:38:43] Speaker 06:
And importantly, FDA has a long-standing policy that allows manufacturers in precisely this circumstance to use the old labeling during a transition period.

[00:38:54] Speaker 06:
that is noted in our recalculation request.

[00:38:57] Speaker 06:
That's a JA 112 footnote 3.

[00:39:00] Speaker 06:
It doesn't use the word FDA, but that's what that footnote is referring to, is this long-standing FDA policy that allows manufacturers to use the old labeling in these circumstances.

[00:39:11] Speaker 06:
So that's why we did it, because we were permitted to do so.

[00:39:13] Speaker 01:
But they don't suggest that they'd buy that reason, because they're not allowing that rationale to go forward.

[00:39:21] Speaker 06:
Yes, and there was no, I think that that goes to our arbitrary and capricious argument, if I am understanding your question.

[00:39:27] Speaker 06:
And so there was no, the denial includes no explanation whatsoever for why the

[00:39:36] Speaker 06:
for why CMS was attributing expenditures of TIPSOVO to manufacturers based solely on the labeler code.

[00:39:46] Speaker 06:
The government's brief tries to fill in that gap in reasoning, but none of their explanations appear in the denial itself.

[00:39:53] Speaker 06:
The denial is at JA 119 to 120, and it's just not in there.

[00:39:57] Speaker 06:
All the denial says is the guidance and the methodology say to use labeler codes, so we're going to use labeler codes.

[00:40:04] Speaker 06:
We told them at the time, we don't think that makes sense here.

[00:40:07] Speaker 06:
We're the NDA holder.

[00:40:08] Speaker 06:
You should consider using the NDA.

[00:40:11] Speaker 06:
And there is no explanation whatsoever for why they didn't do that.

[00:40:15] Speaker 06:
And again, this is not an off the wall novel idea to use the NDA rather than the labeler code.

[00:40:23] Speaker 06:
It's exactly what CMS itself does today in two other drug pricing programs.

[00:40:29] Speaker 06:
So at a very minimum, I think you need to set the denial aside and send it back for a new explanation for why they chose this particular proxy, the labeler code and not the NDA.

[00:40:44] Speaker 06:
Um, if I could, because there were so many questions about the merits of the NDA argument, um, I do want to go, uh, I see them.

[00:40:52] Speaker 06:
I'm far over my time, but I'm, so I wanted to go to preservation, but, but only if it's helpful to the court.

[00:40:59] Speaker 03:
Preservation of the argument.

[00:41:01] Speaker 03:
Yeah.

[00:41:01] Speaker 03:
Okay.

[00:41:02] Speaker 03:
I think, I think we have your briefing on that.

[00:41:04] Speaker 03:
Okay.

[00:41:04] Speaker 03:
But we will give you some time on rebuttal as well.

[00:41:07] Speaker 03:
Thank you very much.

[00:41:18] Speaker 05:
Morning, Your Honours and may it please the court, Sean Janda for the federal government.

[00:41:32] Speaker 05:
I intended to start this morning with the lead statutory argument pressed by Cervier.

[00:41:36] Speaker 05:
And in the absence of any contrary direction from the court, I'm happy to start there.

[00:41:40] Speaker 05:
I think the easiest way to understand why that argument's wrong is just to substitute the definition of specified small manufacturer drugs for those words in the relevant provision, which the district court did at JA 224-25.

[00:41:54] Speaker 05:
We did it at page 26 of our brief.

[00:41:57] Speaker 05:
When you make that substitution, the statute then directs CMS to focus on, quote,

[00:42:02] Speaker 05:
The total expenditures under Part D for any one of the drugs that is produced, prepared, propagated, compounded, converted, or processed by the manufacturer.

[00:42:10] Speaker 05:
I think once you make that substitution, it becomes clear, again, that CMS is acting fully consistent with the statutory text in focusing on who actually produced, prepared, propagated, compounded, converted, or processed the drugs for which there are Part D expenditures.

[00:42:27] Speaker 05:
And I think once you agree with us that that's the right focus, there's just nothing, I think, in the record here.

[00:42:33] Speaker 03:
Sure.

[00:42:33] Speaker 03:
Where that gets us, doesn't that put us right back in the question of what do you mean by?

[00:42:38] Speaker 03:
produced, what do you mean by prepared?

[00:42:40] Speaker 03:
If we had to, you know, we are now the ones that are charged, we own it and we're in charge of it.

[00:42:47] Speaker 05:
So I don't think so, Your Honor.

[00:42:49] Speaker 05:
And I think you could imagine an argument if they made an argument in front of the agency or in front of the district court that says, you know, we did this thing and that thing and the other thing that counts as one of these words.

[00:42:59] Speaker 05:
They just they make that argument.

[00:43:01] Speaker 05:
And I don't want to get ahead of the agency if they had made that argument to the agency.

[00:43:04] Speaker 05:
You know, I don't know if the agency would have thought that doing the quality control or doing the labeling or packaging the product, which they now say they did, would have counted as as one of those words.

[00:43:15] Speaker 05:
I just don't know.

[00:43:16] Speaker 05:
And so I think

[00:43:17] Speaker 05:
once you accept that we're right about the statutory argument, at least as to one legal argument that I think they have consistently pressed, starting in the agency and through this court, which is that it doesn't matter if they actually manufactured any of the units sold to beneficiaries in 2021.

[00:43:34] Speaker 05:
It makes clear they're wrong about that.

[00:43:38] Speaker 05:
And then for everything else, all I think we're in a position to say is that on the record before the agency,

[00:43:44] Speaker 05:
We certainly didn't see anything that suggested that they produce, prepare, propagate, et cetera, the actual unit sold in 2021.

[00:43:50] Speaker 05:
And I think they now think they could make that showing, but they certainly didn't do it before the agency.

[00:43:58] Speaker 05:
And then, I mean, the other thing I'll just sort of say briefly is I think in addition to that kind of

[00:44:03] Speaker 05:
clear textual argument, just every feature of the statute focuses on the manufacturer over and over again.

[00:44:12] Speaker 05:
It doesn't talk about it.

[00:44:14] Speaker 05:
It wasn't very easy to talk about the distributor, the seller, the NDA holder.

[00:44:18] Speaker 05:
And it doesn't do that.

[00:44:19] Speaker 05:
I mean, it really focuses on the physical process of manufacturing the drugs for which there are expenditures in 2021.

[00:44:26] Speaker 05:
And that's where the agency is focused.

[00:44:29] Speaker 05:
I think that's just where the administrative submission sort of starting off fall short.

[00:44:34] Speaker 01:
The label code is not defined in 42 USC 1395.

[00:44:39] Speaker 01:
But you all use that as a way of essentially being a determinative factor as to who's the manufacturer is.

[00:44:46] Speaker 01:
So how do you explain that?

[00:44:47] Speaker 05:
Yes, so the labeler code is given by the FDA to manufacturers.

[00:44:52] Speaker 05:
And I think the expectation is that the manufacturer or in some circumstances, a repackager or a relabeler puts their labeler code on the product.

[00:45:01] Speaker 05:
And so what the guidance that CMS Applied here says is that the labeler code is what the manufacturer puts on the product.

[00:45:07] Speaker 05:
We're going to use that at least as a first pass.

[00:45:12] Speaker 05:
I think, again, if

[00:45:13] Speaker 01:
Is an industry understood term in that regard that the labeler code is for the manufacturer?

[00:45:19] Speaker 05:
Yes, so labeler codes are given, I think we set the statute, actually the FDA, not CMS, but the FDA provides labeler codes to manufacturers, I think packagers, labelers, and then the labeler code is going to identify the manufacturer or potentially the repackage or the relabeler.

[00:45:36] Speaker 05:
I think we had a circumstance where someone came in and said, you know, we actually manufactured the stock.

[00:45:42] Speaker 05:
It was then repackaged.

[00:45:44] Speaker 05:
And the repackager took off our labeler code and put on their labeler code.

[00:45:47] Speaker 05:
But you should give us credit for the stock because we actually manufactured it.

[00:45:51] Speaker 05:
The agency might well take a look at that evidence and determine that it's appropriate to disregard.

[00:45:56] Speaker 01:
And then how do you respond to your opposing counsel's arguments with respect to the NDA as opposed to the labeler code?

[00:46:03] Speaker 05:
I mean, I think there's a couple of things.

[00:46:05] Speaker 05:
I think this is a legal matter.

[00:46:06] Speaker 05:
Again, we've been very easy to write the statute to focus on the NDA holder or the owner or the seller.

[00:46:11] Speaker 05:
And it doesn't do that.

[00:46:12] Speaker 05:
It focuses very much on the physical process of producing, which I think the guidance reflects CMS's determination that the best evidence

[00:46:20] Speaker 05:
or at least sort of the starting point of who did the actual manufacturing is going to be the labeler code.

[00:46:27] Speaker 05:
And again, if they come in, they'd say, you know, we did A, B, C, D, and E physical things to this product, even though it has someone else's labeler code on it, the agency may well have been willing to engage with that evidence.

[00:46:40] Speaker 05:
and disregard the labor code, but that just was not a thing that was ever presented to the agency in this case.

[00:46:46] Speaker 04:
Can I take it back to your plain language argument?

[00:46:50] Speaker 04:
So I'm trying to do on the fly what you suggested, which is plug in the

[00:47:00] Speaker 04:
special small manufacturer drug definition into the legally operative text.

[00:47:05] Speaker 04:
And I'm going to elide over some things that seem to me clearly immaterial.

[00:47:12] Speaker 04:
So when I do that, I get total part B expenditures for any drug manufactured by the manufacturer.

[00:47:25] Speaker 04:
Fair summary.

[00:47:27] Speaker 05:
I think the first part is right for any one of the drugs manufactured by the manufacturer.

[00:47:33] Speaker 04:
I came at this with a strong intuition that you have to be right, but just reading those words,

[00:47:47] Speaker 04:
And the TIPSAVO was manufactured by the manufacturer in 2021.

[00:47:57] Speaker 04:
And then the statute says, what are the total expenditures, total Part D expenditures for TIPSAVO?

[00:48:07] Speaker 04:
That seems to not, just those words do not seem to foreclose

[00:48:15] Speaker 04:
your friend's interpretation.

[00:48:18] Speaker 05:
I mean, so even if you think that they're not sort of foreclosed by the statutory text, I think just every relevant indication of the statute focuses in on sort of particular expenditures for particular drug stock manufactured by a particular entity.

[00:48:32] Speaker 05:
And it starts with the expenditures, which I think as Judge Mollett observed earlier, Medicare doesn't make expenditures for a drug line.

[00:48:41] Speaker 05:
It doesn't buy tips OVO.

[00:48:43] Speaker 05:
as a product as a whole, it makes expenditures for a particular dispensing of TIPSOVO to particular beneficiaries.

[00:48:51] Speaker 05:
And we really have to focus in CMS's view on those expenditures.

[00:48:55] Speaker 04:
I mean, second, I think it's- Yes, in the sense you have to focus in on Medicare expenditures on TIPSOVO.

[00:49:06] Speaker 04:
No question.

[00:49:07] Speaker 04:
You can't focus on, you know,

[00:49:11] Speaker 04:
Blue Cross expenditure on tips about, but that doesn't answer the question, you know, one level more granular on sort of is it Medicare expenditures on tips about.

[00:49:24] Speaker 04:
For the hills that.

[00:49:30] Speaker 05:
Whether the predecessor manufacturer or the successor manufacturer, I think the sort of the frame of the expenditures puts us talking about particular stock rather than talking about the drug line as a whole.

[00:49:44] Speaker 05:
But even if that doesn't do it for you, and I think again,

[00:49:47] Speaker 05:
we have sort of one long definition here that's all linked together.

[00:49:52] Speaker 05:
As Judge Moss observed, I think Tipsovo sort of tries to break out, sorry, Servia tries to break out the different pieces of what is really a connected phrase and tries to take them all in isolation, which is not really how the statute reads.

[00:50:07] Speaker 04:
I think in addition, as the earlier- How are they trying to do that?

[00:50:11] Speaker 04:
I thought they just have a

[00:50:16] Speaker 04:
You heard it, a holistic theory, right?

[00:50:19] Speaker 04:
This is about projecting what's gonna happen in 2022 and who owns the drug on, this is not a crazy way, their reading of the statute is not a crazy way to assess who will be a small and non-diversified manufacturer in 2022 based on what's happened in 2021.

[00:50:42] Speaker 05:
I think it does lead to a bunch of anomalies, which I'm happy to talk about.

[00:50:45] Speaker 05:
And I think the one that they have sort of managed to explain why they think it's not so anomalous is like maybe the only one where they could say that.

[00:50:52] Speaker 05:
But just focusing on before we get to that.

[00:50:55] Speaker 04:
Is the December 31st hypothetical?

[00:50:58] Speaker 05:
Right.

[00:50:58] Speaker 05:
And I understand the response to that.

[00:51:00] Speaker 04:
That seemed to be very anomalous, but the answer, your friend's answer,

[00:51:06] Speaker 04:
resonated a little bit.

[00:51:07] Speaker 05:
I mean, fair enough.

[00:51:08] Speaker 05:
I think if you flip the hypothetical and make it a single pill on January 1st, and then they diverse, they divest the line, then you don't have the answer that, you know, while it will tell you what's going to happen in 2022, because it's right before 2022.

[00:51:20] Speaker 05:
But I think it would be the exact same thing.

[00:51:22] Speaker 05:
I think they would say if you manufacture a single pill on January 1st, that's then sold to a Part D beneficiary, you are entitled to all of the expenditures for TIPSOVO for that pill.

[00:51:33] Speaker 05:
Or for that drug for the year, even though at the end of the year, you don't have.

[00:51:38] Speaker 05:
You don't have to.

[00:51:40] Speaker 05:
Also, I mean, the other thing I would say is they also will apply in circumstance where throughout the whole year, you have multiple manufacturers manufacturing.

[00:51:48] Speaker 05:
the same drug through licensing agreements or otherwise.

[00:51:51] Speaker 05:
And I think, again, under CMS's view, each manufacturer would presumably put their own labeler code on the stock that they manufactured and would get credit for those expenditures.

[00:52:00] Speaker 05:
Again, under survey's view, I think each manufacturer would be entitled to the total parking expenditures of all the manufacturers making that same drug, which again, just doesn't, if you're trying to think about who's

[00:52:11] Speaker 05:
Small and diversified doesn't map on to the actual manufacturing activities and the drug portfolios.

[00:52:18] Speaker 05:
And so I mean, again, you see a message.

[00:52:20] Speaker 05:
high level view of how this is supposed to work.

[00:52:22] Speaker 05:
It's just that you match up who actually manufactured the pills with a particular drug manufacturer.

[00:52:29] Speaker 05:
You aggregate those together and that gives you a sense of the drug manufacturers, both size and then diversified and undiversified status and moving away from the actual manufacturing of the drugs.

[00:52:42] Speaker 05:
I think we'll introduce those anomalies.

[00:52:44] Speaker 03:
The way you know, so assume I'm a Part D beneficiary and I get some tips over my insurance company to pay for it.

[00:52:54] Speaker 03:
Or the insurance company in the media area works it.

[00:52:57] Speaker 03:
How do you know?

[00:52:59] Speaker 03:
I assume it's a labeler product.

[00:53:01] Speaker 05:
So I think if you were trying to figure out who manufactured it, if that's your question.

[00:53:05] Speaker 03:
That's what you have to do.

[00:53:05] Speaker 03:
You have to know.

[00:53:06] Speaker 03:
You line up all the Part D beneficiaries and all their tips over.

[00:53:11] Speaker 03:
You figure out who made it.

[00:53:13] Speaker 03:
You need to go back and see if it's diversified or not.

[00:53:15] Speaker 05:
Right.

[00:53:15] Speaker 05:
And so the first thing that you do and the first thing that CMS does is just aggregate all the data.

[00:53:20] Speaker 05:
When there's a dispensing of the drug, the pharmacy or whatever fills out a form that includes the labeler code that gets sent back to CMS.

[00:53:27] Speaker 05:
And so CMS just sort of starts by pulling the labeler code.

[00:53:31] Speaker 03:
And I assume that's because there's an assumption that the labeler code, you rely on that because that generally identifies the manufacturer?

[00:53:40] Speaker 05:
Correct.

[00:53:40] Speaker 05:
And again, as I said, I think

[00:53:43] Speaker 05:
I don't think survey disputes that in the mine run of cases, the labor code is going to accurately identify who actually manufactured the product.

[00:53:50] Speaker 05:
If there were an odd circumstance where that weren't true, the agency, I think, would have to confront that.

[00:53:57] Speaker 05:
I'm aware of it.

[00:53:58] Speaker 05:
It's not in the record.

[00:53:59] Speaker 05:
But I'm aware of at least one manufacturer that came to CMS with exactly that sort of information where they said, though it was someone else's labor code.

[00:54:08] Speaker 03:
It's an unusual situation.

[00:54:10] Speaker 05:
But we did the thing.

[00:54:11] Speaker 05:
CMS.

[00:54:12] Speaker 05:
looked at the evidence they submitted, and ultimately determined that it should disregard the labeler code.

[00:54:17] Speaker 03:
But you rely on the labeler code.

[00:54:19] Speaker 03:
Is the pharmacist reporting who owns the NDA?

[00:54:23] Speaker 05:
I'm not sure what all information is in the prescription drug event records that get sent back to CMS.

[00:54:30] Speaker 05:
I know the labeler code is there.

[00:54:31] Speaker 05:
I just don't know if the NDA holder

[00:54:35] Speaker 05:
Unless it's reported on the package, I would assume there will be a thing that they wouldn't report, but I don't want to say that for certain because I have not seen what these records look like.

[00:54:45] Speaker 03:
Right, but it sounds like the way the system is, the way it's set up is, okay, these drugs are getting dispensed.

[00:54:51] Speaker 03:
I got to know who manufactured it for purposes of doing this analysis, maybe for other reasons too, but certainly for purposes of this analysis, I get the information based on the labeler code and the labeler code comes up to me and then

[00:55:05] Speaker 03:
We can do the math, figure out who qualifies as the, sorry, the wording of this is a specified small manufacturer.

[00:55:14] Speaker 05:
Right.

[00:55:15] Speaker 05:
And that's how CMS has done it.

[00:55:17] Speaker 05:
And there's nothing in the record here.

[00:55:21] Speaker 05:
I think we've put CMS into the idea that the labeler code here did not actually identify who had produced, propagated, et cetera, et cetera, the pills that were being sold in 2020.

[00:55:38] Speaker 04:
Okay.

[00:55:39] Speaker 04:
Can I ask you about the alternative theory?

[00:55:42] Speaker 04:
Just seems very clear to me that tips about was not covered by the CG.

[00:55:52] Speaker 04:
of survey for 2021.

[00:55:55] Speaker 04:
Why doesn't that resolve this appeal?

[00:55:58] Speaker 05:
Right.

[00:55:59] Speaker 05:
So I think the problem that we have with that is that my understanding is there is a very long historical practice of CMS that allows one manufacturer to piggyback on other manufacturers.

[00:56:14] Speaker 05:
agreement with which it helps ensure I think sort of uninterrupted part D coverage of the drugs when drugs sort of change hands and so CMS's understanding has been in a circumstance where one manufacturer is piggybacking on a different manufacturer's agreement that you sort of treat that piggybacking as the agreement of

[00:56:37] Speaker 05:
um of piggybacking manufacturer and so CMS would not uh my understanding is would not have in this circumstance or another circumstance uh refused to attribute expenditures to um survey or to another drug manufacturer because they were piggybacking rather than listing the code under the drug on their own agreement.

[00:56:57] Speaker 04:
So it would be just on the facts of this case April 1, April 1 sale

[00:57:07] Speaker 04:
And then by December 1, pills manufactured by Cervier are paid for by Medicare.

[00:57:20] Speaker 04:
And you want to count.

[00:57:23] Speaker 04:
Those pills, right?

[00:57:25] Speaker 04:
So, for these purposes, you don't want the lack of the CGDP agreement to disable that.

[00:57:31] Speaker 05:
Attribution, I think is that attribution in the statutory context.

[00:57:36] Speaker 05:
My.

[00:57:38] Speaker 05:
very vague understanding.

[00:57:40] Speaker 04:
Just trying to figure out what's the difference between the two theories, like where does this have, where does the difference matter?

[00:57:47] Speaker 05:
So I think it matters for purposes of this particular statutory determination in exactly that context.

[00:57:53] Speaker 05:
My understanding is that... The one I just said?

[00:57:55] Speaker 05:
Correct, where it's still on, but they actually make it themselves.

[00:57:59] Speaker 05:
Just to be clear, my understanding from the agency is that there is a fear that it would destabilize if

[00:58:06] Speaker 05:
I mean, if they were ready to not permit this sort of look-through or attribution of the one manufacturer on the other agreement, that may destabilize other circumstances where the agency has sort of long-permitted that sort of piggybacking, which ensures, again, sort of hard de-coverage of drugs uninterrupted in the circumstance where they change manufacturers.

[00:58:29] Speaker 01:
And what's the government's response to Serbia's argument about its normal business not to immediately change the label?

[00:58:36] Speaker 05:
So my understanding, Your Honor, I'm not sure about the regulation that you were referencing.

[00:58:39] Speaker 05:
My understanding is that the CMS or FDA, it's probably FDA actually, would not have a problem or does not have a problem with sort of already manufactured pills having the labor code of that they need to manufacture them, even if they are then bought as pre-existing stock and sold in these circumstances.

[00:58:58] Speaker 05:
There's no requirement that the labor code be updated to reflect a new distributor or

[00:59:04] Speaker 05:
seller which I think also sort of underscores that the label or code is added I think generally at the time the manufacturing happens and so it's a quite good proxy for the manufacturer rather than for the seller, the distributor, pharmacy, I mean all the people further down in the chain which are not who we think the statute focuses on.

[00:59:22] Speaker 01:
Looking to the label or code to determine the manufacturer in some instances.

[00:59:26] Speaker 05:
Sorry, I think my understanding is that because the labeler code is often put on when the product is manufactured, it is a quite good proxy for the actual manufacturer rather than for the distributor, the pharmacy, the seller further down in the supply chain.

[00:59:43] Speaker 03:
Can you explain to me the piggybacking one more time?

[00:59:46] Speaker 03:
Because the way it's described in your brief sounds like it's the inverse of this case.

[00:59:51] Speaker 03:
So tell me, piggyback, define piggyback for me.

[00:59:55] Speaker 05:
So my understanding, which comes with all of the usual copyouts of my understanding of CNS is that.

[01:00:03] Speaker 05:
In a circumstance like where one drug manufacturer has a product on their.

[01:00:09] Speaker 05:
Program agreement or had a product on the program agreement and then they sell the product line to another manufacturer has happened here.

[01:00:17] Speaker 05:
CMS permits the acquiring manufacturer to piggyback on the selling manufacturers.

[01:00:23] Speaker 05:
agreement for the purposes of of that drug and the reason for that is that it ensures there's uninterrupted part D coverage because sort of inclusion on a program agreement is a requirement for part D coverage and so that there's a desire not to have an interruption in coverage when by having to sort of transfer or amend agreements.

[01:00:50] Speaker 03:
What your footnote says is

[01:00:52] Speaker 03:
Thus, if Part D had incurred expenditures, and I could just be misunderstood, but in 2021, Gertrude Sobo, that was covered by Agios's agreement, but the survey had manufactured under its own labeler code,

[01:01:09] Speaker 03:
You would go ahead and attribute this survey, but this is that's not what happened here.

[01:01:13] Speaker 03:
Right survey didn't manufacture anything under its own labeler code, so this doesn't your example doesn't fit this case and fix the opposite right?

[01:01:21] Speaker 05:
Sorry, so we're saying is that if survey had actually manufactured and produced under its own labeler code, CMS would not treat the fact that they don't fall within this piggybacking exception.

[01:01:32] Speaker 05:
But we do not think that they fall within the statutory definition.

[01:01:37] Speaker 03:
No, no, they don't fit within this piggybacking policy.

[01:01:41] Speaker 05:
I mean, I think they, until they listed on their own agreement, they were piggybacking on Agios's agreement, which is not just.

[01:01:51] Speaker 03:
The piggybacking would occur

[01:01:58] Speaker 03:
Right, so you already have Tim Sobo covered by IGOS's agreement.

[01:02:01] Speaker 03:
They got the agreement.

[01:02:04] Speaker 03:
But if Serviette had manufactured under its own label code, then Serviette could piggyback on the agreement.

[01:02:11] Speaker 03:
But that's not what happened here in your view, correct?

[01:02:16] Speaker 05:
Correct.

[01:02:16] Speaker 03:
OK, so then they can't fall within your piggyback exception.

[01:02:19] Speaker 05:
So this may be an imprecision.

[01:02:21] Speaker 03:
So why aren't we going back with the statute?

[01:02:22] Speaker 05:
So this may be an imprecision in the way we draft it.

[01:02:24] Speaker 03:
My understanding is that it's blocked.

[01:02:28] Speaker 03:
You talk about Servier manufacturing and using its own labeling code.

[01:02:32] Speaker 05:
Piggybacking for a lot of purposes, piggybacking is not a thing that CMS permits for this purpose only.

[01:02:40] Speaker 05:
And so what we are saying is that once Servier is the manufacturer of the drug, has acquired the drug, they may- I'm sorry, I'm very sorry to interrupt, but you just said two very different things.

[01:02:54] Speaker 03:
Once Servier has manufactured the drug,

[01:02:57] Speaker 03:
And then you said once they have owned the drug, but those are two very different things.

[01:03:04] Speaker 03:
What is required to piggyback?

[01:03:05] Speaker 03:
Do you have to actually have manufactured?

[01:03:07] Speaker 03:
If you're a manufacturer, then you can piggyback on someone else's agreement.

[01:03:12] Speaker 05:
I believe if you own it, you can also piggyback, although I'm not positive about that.

[01:03:15] Speaker 05:
And the distinction, let me just be really clear, is that there are a lot of different circumstances in Part D where it's very important that you have a program agreement that covers a particular drug.

[01:03:28] Speaker 05:
And so there may be other circumstances where even if Servier were not manufacturing Tipsovo, it would be important that the Tipsovo that Servier is selling be covered by a program agreement, at least for those purposes.

[01:03:42] Speaker 05:
CMS is willing to let the acquiring manufacturer piggyback on the old manufacturer's agreement until they update their own agreement.

[01:03:51] Speaker 04:
Is this a fair answer to Judge Millett's question, which is you're not saying that there was piggybacking here.

[01:04:04] Speaker 04:
What you are saying is that the rationale of the alternative holding

[01:04:11] Speaker 04:
would foreclose piggybacking in other circumstances where you want it to be allowed?

[01:04:20] Speaker 05:
Correct.

[01:04:20] Speaker 05:
I think both.

[01:04:22] Speaker 05:
with respect to this very particular application of determining specified small manufacturers, but also with respect to, again, sort of Part D generally, where the ability to piggyback comes up, my understanding, or came up.

[01:04:34] Speaker 04:
I get the concern.

[01:04:36] Speaker 04:
I guess I'm not entirely sure why this whole piggybacking thing is consistent with statute.

[01:04:42] Speaker 04:
So my understanding, Your Honor, is that there is a statutory requirement that the drug has to be covered by an agreement of the manufacturer.

[01:04:52] Speaker 05:
For the year for that year, so my understanding is that that is CMS is long standing practice.

[01:04:57] Speaker 05:
I mean, Congress is obviously enacting this provision against the backdrop of that long standing practice.

[01:05:02] Speaker 05:
I think if we were sort of forced to argue about how to interpret the statute, we would rely quite heavily on on that pre existing practice.

[01:05:10] Speaker 03:
Really?

[01:05:10] Speaker 03:
We're going to assume Congress understands that this piggybacking thing is when.

[01:05:14] Speaker 03:
I don't.

[01:05:16] Speaker 03:
I mean, you can't define it clearly, then we can't assume Congress knew about it.

[01:05:23] Speaker 05:
I think Congress certainly understands.

[01:05:27] Speaker 05:
I think the court can assume that Congress understands the general concept in this case, or at least intends to.

[01:05:32] Speaker 05:
not upset CMS's long-sale practices in this area.

[01:05:36] Speaker 05:
I think for purposes of this court's review, all the court needs to say is that the government is affirmatively waiving the argument.

[01:05:42] Speaker 05:
And I do think that the party presentation principles that my friend on the other side discussed are constraining in a way that I think would overcome the usual ability to affirm on grounds not reached by the district court or on other grounds supported by the record.

[01:05:58] Speaker 05:
I think in this case, we are

[01:06:01] Speaker 05:
telling you we do not think that that is how CMS interprets and applies the statute.

[01:06:05] Speaker 05:
It's not something that we would defend.

[01:06:07] Speaker 05:
It's not something we would apply in the first instance.

[01:06:09] Speaker 03:
What case says that we assume Congress is aware of agency longstanding practices at this level of obscurity?

[01:06:22] Speaker 05:
I'm not going to be able to set a case for you for that principle.

[01:06:25] Speaker 03:
So I don't know why we assume Congress legislated again.

[01:06:28] Speaker 03:
I mean, you guys, you guys could try arguing it, but you're going to have to have a pretty clear understanding of inconsistent application of piggybacking.

[01:06:37] Speaker 03:
And this was a one year situation here.

[01:06:42] Speaker 05:
I mean, this was a one year situation, but just to be like, really clear about this.

[01:06:47] Speaker 05:
Part D coverage is only available for drugs that are listed on the program agreement.

[01:06:52] Speaker 05:
And so my understanding is that like.

[01:06:53] Speaker 05:
from the beginning or close to the beginning CMS has permitted this sort of whether it's attribution of one agreement to another to the prior manufacturer or sort of allowing manufacturers to have both be considered to be on the agreement in some sense to ensure that when you have

[01:07:12] Speaker 05:
drugs moving from one manufacturer to another, that there's not a break in the ability to cover those drugs.

[01:07:17] Speaker 05:
And that, I think, comes up in a number of different contexts, not just in this very specialized context.

[01:07:23] Speaker 05:
Again, we'd be happy to provide more briefing on that if the court would like it.

[01:07:27] Speaker 05:
I think for this court's purposes, though, all the whole we need to say is that if it wants to say anything, that the argument has been very affirmatively waived by the government and party presentation principles would constrain you from reaching it, notwithstanding that waiver.

[01:07:42] Speaker 05:
There are no other questions.

[01:07:43] Speaker 04:
Not sure we're constrained, but you might have prudential considerations, but anyway.

[01:07:49] Speaker 03:
Any more questions?

[01:07:52] Speaker 03:
All right.

[01:07:52] Speaker 03:
Thank you.

[01:07:52] Speaker 03:
Thank you very much.

[01:07:56] Speaker 03:
We will give you 3 minutes.

[01:08:10] Speaker 03:
Thank you.

[01:08:10] Speaker 03:
Sorry, Hazel.

[01:08:11] Speaker 06:
Thank you, Your Honor.

[01:08:12] Speaker 06:
A couple of points.

[01:08:13] Speaker 06:
First, I'd like to point, Judge Millett, point you to the FDA's National Drug Code regulations.

[01:08:20] Speaker 06:
They are cited on page 13 of our opening brief.

[01:08:22] Speaker 06:
And they say that the labeler code in the NDC, it can indicate a person who engages in manufacturing, repacking, relabeling, or private label distribution of a drug.

[01:08:35] Speaker 06:
So it doesn't necessarily indicate the manufacturer.

[01:08:37] Speaker 06:
Here, it actually indicates the private label distributor.

[01:08:40] Speaker 06:
There was a question about whether it's a problem that multiple manufacturers could meet the definition for the same drug or unit.

[01:08:49] Speaker 06:
I don't think that's a problem here.

[01:08:50] Speaker 06:
That's a feature of the government's reading of the statute.

[01:08:52] Speaker 06:
It's a feature of our reading the statute too.

[01:08:54] Speaker 06:
And it's not a problem for either of us because it's not like they're going to be duplicate discounts here.

[01:08:58] Speaker 06:
Again, they're not going to be duplicate discounts here.

[01:09:02] Speaker 06:
You're not trying to give discounts for historical transactions that happened back in 2021.

[01:09:07] Speaker 06:
You're doing discounts moving forward.

[01:09:09] Speaker 06:
I think the most important point I want to leave this court with is that you've got a lot of detailed explanations from the government today from the podium about how they view the statute and if you put all those all of those explanations side by side with the denial that CMS actually issued on JA 119 and 120 there is a huge disconnect

[01:09:30] Speaker 06:
None of the government's explanations appear in JA 119 and 120.

[01:09:36] Speaker 06:
So I think the easiest path for this court is to simply remand for explanation from the agency.

[01:09:44] Speaker 06:
We told them we own the NDA.

[01:09:46] Speaker 06:
We are responsible for the manufacturing.

[01:09:49] Speaker 06:
That's how

[01:09:50] Speaker 06:
this agency administers identical manufacturer definitions in two other statutes.

[01:09:57] Speaker 06:
At a minimum, we were entitled to an explanation for why they were using the Labeler Code as a proxy instead of the NDA.

[01:10:05] Speaker 06:
I think you heard from the government today a couple times that Labeler Code is at best a proxy or a first cut.

[01:10:11] Speaker 06:
They acknowledge the possibility that it could be something else, that another entity could be the one that actually meets the statutory definition.

[01:10:19] Speaker 06:
they've already explained that yeah but that doesn't matter in this case because as they read the definition of manufacturer you didn't do it but the cms certainly did not say that i mean that's cms certainly did not say that in in the denial that they gave us at ja 119 and 120 so i think at a minimum under channeling the score if we think that

[01:10:42] Speaker 04:
we can and should resolve all of the legal questions.

[01:10:47] Speaker 04:
And we do so against you.

[01:10:51] Speaker 04:
What's left of the arbitrary and capricious seemed like a lot of those points are downstream from the legal dispute.

[01:11:00] Speaker 06:
So I think there's there's the possibility of when they have to give an explanation of them seeing the light as we see it.

[01:11:06] Speaker 06:
I think there's also there was a procedural problem.

[01:11:09] Speaker 06:
Assume you lose on your contrary to law.

[01:11:12] Speaker 06:
I understand.

[01:11:12] Speaker 04:
What's left to be remanded?

[01:11:15] Speaker 06:
So there's the possibility, if they're going to use some kind of proxy for the manufacturer, they could use labeler code, but NDA is another possibility and they have to decide which one of those makes sense.

[01:11:26] Speaker 06:
I think beyond that though, I do want to make clear there's a procedural problem here as to why we didn't put in more evidence at the time.

[01:11:33] Speaker 06:
In at the time, the government told us that CMS told us they were not open to considering the very information that they are now faulting us for not providing.

[01:11:43] Speaker 06:
So that's in the guidance at J.A.

[01:11:45] Speaker 06:
55.

[01:11:45] Speaker 06:
They said that they would consider three things.

[01:11:48] Speaker 06:
Medicare Part B claims data, Part D PDE data, and ownership information submitted by manufacturers.

[01:11:54] Speaker 06:
That's it.

[01:11:56] Speaker 06:
So in our recalculation request, we put ownership information front and center.

[01:12:02] Speaker 06:
Then they came back into denial and said, actually, even that additional ownership information that you gave us, it goes beyond the guidance, it goes beyond the methodology, so we're not going to consider it.

[01:12:11] Speaker 06:
They then said the same thing to FarmEssentia when they put in additional evidence that went beyond the PDE data.

[01:12:16] Speaker 06:
So now, here in litigation, they're saying, actually, the problem was you didn't give us a different kind of information, information about specific activities that you took with respect to specific GIBSOVO units.

[01:12:30] Speaker 06:
If they had told us at the time that they were open to considering that kind of evidence, we could have put it in front of them at the time.

[01:12:37] Speaker 06:
And if we are given an opportunity, if there's any kind of remand to the agency, we'll put that before them and they can evaluate it.

[01:12:45] Speaker 03:
Thank you very much counsel to both counsel.

[01:12:47] Speaker 03:
The case is submitted.

[01:12:47] Speaker 06:
Thank you.